Viennese bakery closes in latest retail headache for Plaza Hotel

From left, Arthur has shuttered and today is Demel’s last day, both at the Shops at the Plaza.

When the Viennese bakery Demel closes shop tonight for the last time in the Plaza Retail Collection stores, it will be the fourth retailer in about a month to abandon the troubled below-ground concourse.

Demel, which is embroiled in a lawsuit with the owner of the Plaza Hotel, Elad Properties, will serve its last chocolate cake and latte tonight, a lawyer for the company said, and move out of the building at 768 Fifth Avenue over the next few days. A new location has not yet been identified, the attorney said.

That follows French clothing retailer LTJ Arthur’s shuttering March 21 of its small location just two days before its United States license holder was slapped with a $150,000 lawsuit by Elad Properties affiliate Plaza Accessory Owner for unpaid rent, court records show. Several weeks before that, two jewelers, Iradj Moini and Good Fortune Ten Thousand Things, left, fellow tenants said.

The retail space at the Plaza has been challenged with lawsuits and vacancies since the iconic Plaza Hotel reopened in 2008 following a $400 million renovation, with tenants and brokers complaining of poor property management and the lack of a coherent marketing plan.

“It just sends a message to the market, whether it is Demel or Arthur or whatever. It sends a message that this location just is not working and we are not waiting any longer [to leave],” said Faith Hope Consolo, chairman of retail leasing and sales at Prudential Douglas Elliman. She is not involved with the Plaza retail.

But the owners say there are positive developments, including fashion retailer Emanuel Ungaro and stationer Connor Papers opening stores next month and the re-opening of the Palm Court in April.

Demel is fighting Elad Properties in New York State Supreme Court over back rent and claims by the bakery that it was misled into signing a 10-year lease in 2007. The litigation remains ongoing.

In a separate lawsuit, Elad, through its affiliate Plaza Accessory Owner, sued Arthur’s US license holder, businessman Evgeny Freidman and his Arthur Plaza Realty, for $150,000 in alleged back rent.

The suit, filed in New York State Supreme Court March 23, says the retailer’s monthly rent was $5,833, which would equate to a rent of $200 per square foot for the 350-square-foot space.

“Arthur, which owes substantial back rent, can no longer be accommodated,” an outside spokesperson for Elad, Lloyd Kaplan, told The Real Deal. He said the new stores moving in to the Plaza were part of a general improvement that included increased foot traffic, although no figures were immediately available to support that claim.

“There is an upward trend and crowds are increasing as the excitement builds,” Kaplan said. “The transition is a reflection of the positive outlook for the shops at the Plaza.”

But Freidman, chairman of FOM Trading, which holds the US license to Arthur, said he and other tenants were hoodwinked into leasing at the Plaza.

“They did a bait and switch. [With] all the tenants! It was an absolute disaster! All the tenants either left or will be leaving!” he wrote in an e-mail.